[TimPC]

I get that Georgism doesn't tax the improvements. I think we have a fundamental disagreements about how mortgages work. A mortgage doesn't make the bank the owner of the land. Even if we strangely ruled that it did, that would lead to strange situations where as long as people were paying a mortgage they could live tax free on their land. But the minute that mortgage disappeared they'd be on the hook for the tax value.

I don't see a good way to get to Georgism without government absorbing the mortgages as the fallout to the economy of all that debt suddenly having little in the way of assets underlying it is a huge problem. I do agree I exaggerated with my claims of $0 since the improvements on the property would have some non-zero value, but land represents the majority value of most houses and the land value would be effectively reduced to zero by the change in value from the taxation. That would be enough to put most mortgages underwater and the asset would no longer sell for the cost of the mortgage. I don't see government doing this and just saying "too bad, investors absorb the loss".

[pydry]

The government already backstops most residential mortgages through freddie/fannie. Absorbing the losses and taking in LVT instead of mortgage payments will be nothing more than an accounting difference for many mortgages (e.g. say, some pension funds).

Some land owners should have to eat losses. Thats the whole point. If you live on a portfolio of land inherited through your 15th century duke great grand uncle you should be getting a job at McDonalds rather than living off the labor of others.

The problem is less technical and more political. Try to deprive large scale land holders of their property and they will bankroll a fascist uprising and launch a coup while foreign leaders in hock to property owners elsewhere will back the coup and enact punishing sanctions to prevent it from being seen to work.

It'll happen one day probably but the transition will be bloody and violent as it always has been when land is redistributed.

[TimPC]

I think the portion of land owners in the US who inherited their land once is smaller than you might think. The portion who own property through a chain of inheritances going back to the 15th century is small enough to be virtually non-existent.

It’s all well and good to say some land owners will have to eat losses. Which land owners? How severe losses? The fact of the matter is that expensive housing in major cities has forced a substantial portion of the middle class to misallocate their portfolios and put far too large a percentage of their funds into real estate in order to have a primary residence. If you feel this group should eat losses without compensation you’re basically saying the government should financially doom them. More broadly it’s not uncommon to see a house in many neighborhoods become 50+% of a retirement plan. Cratering the value of homes without compensation dooms many people to less than half the standard of living they were expecting in retirement.

I agree with you that the transition you want would have to be bloody and violent. It would also have to be authoritarian. Simply put the groups you want to impose huge financial penalties on will oppose you and without them you lack the votes to pass this democratically.

[pyradius]

These are not show-stoppers, nor are they something that Georgists have failed to consider.

"Another basis on which it is argued that greatly increased taxes on land are infeasible is that if land values were to fall precipitously, the financial system would collapse. It is true that many properties have mortgages that would exceed the value of the property if land taxes were increased significantly. This makes it necessary to think carefully about who should absorb the decline in aggregate asset value that would accompany a significant shift toward taxing land. Nevertheless, it is possible to plan for a restructured financial system that would have shed its dependence on land as collateral." http://www.wealthandwant.com/docs/Tideman_CTL.html#I._Taxing...

"Furthermore, as we discuss in more detail in our paper, the number of net winners from this reform would far exceed the number of net losers, who, if necessary, could be exempted or compensated at little budgetary cost. The winners would even include almost all of the very rich, who not only hold the vast majority of US land but who as a rule are also very well diversified, with land only accounting for a small share of their portfolios. They would benefit greatly from the countervailing cuts in labour and capital income taxes." https://voxeu.org/article/post-corona-balanced-budget-fiscal...

"It came as a quite natural development that also the question of incorporating these ideas into Danish Law was raised. From the very beginning, Jakob E. Lange was convinced that the problem of indebtedness, especially the mortgage debts, must be solved when the full Land Rent, or Ground Duty (in Danish "Grundskyld") were to be collected for a public revenue.

When in 1889 Henry George was on a speaking tour in England, Jakob E. Lange made use of the opportunity and went to England to meet him and to discuss the problem with him. The memoirs of Jakob E. Lange relate that Henry George completely accepted his standpoint; an eventual full Ground Rent which were to exceed the present property taxes ought to be proportioned between the title owner and the mortgage holder. This agreement between Henry George and Jacob E. Lange is also found expressed in the later correspondance between the two." https://cooperative-individualism.org/bille-frank_danish-ame...

[TimPC]

Tideman's proposal is for the costs to the system to be absorbed by the current holders of property.

As a first approximation, people would continue to hold title to the land to which they now hold title, and would continue to owe whatever money they now owe. But compensation could be sought on a case-by-case basis, by individuals who stood to bear the costs of the moral accident disproportionately and did not have substantial assets. Any financial institutional whose continued existence was threatened by the transition would be bailed out in exchange for a significant fraction of its equity. The costs of the compensation would be paid by a capital levy.

I don't think this proposal is feasible. Many people owe more than their entire net worth on their primary residence. The plan is to tax land to the point that the value of land for that residence goes to zero leaving only the value of the structure on that land. The structure value is often a small fraction of the total current value of the home. This puts people sizeably underwater and would result in a fair number of people forcibly vacated from their homes as banks sold the structures to pay the mortgages.

The bailouts of various financial institutions would be expensive, as would the system shocks from the various losers on the mortgage debt. Lastly, many people in old age sell their homes to pay for living in a nursing home until they die. This option would become infeasible if we drastically reduce the value of their homes and given their old age they would have no viable alternative to generate alternate capital.

His proposed solution to this is a vague and nebulous "case-by-case" compensation for disproportionate costs without adequate assets. Depending on your definition of inadequate assets and disproportionate costs the total cost of this compensation can range from nearly $0 to the vast majority of all current property values. Keep in mind that a sizeable percentage of the population owns a single family residence that is a disproportionate portion of their net worth and generally factors into their retirement plans. I'd argue that every such individual is disproportionately impacted and does not have adequate assets.

Zillow estimates the total residential property market in the US at $33.6 trillion dollars. I can't find good statistics for single family owners vs landlords but it's easy to assume that close to 50% of the market will be situations I described. This makes it quite possible for the homeowner compensation to be in the area of $16.8 trillion dollars.

Similarly, mortgage debt is often held by pension funds that would struggle to pay their pensions out if that wealth suddenly evaporated or was vastly reduced due to people abandoning their homes. The current US residential mortgage market is $17.6 trillion dollars. Assuming half of this qualified for hardship we'd have $8.8 trillion dollars of subsidies.

There are other institutions and individuals adversely effected and a program to adequately compensate them all may well cost as much as the current US debt which is currently $30.5 trillion dollars.

I think Tideman vastly understates the problem. The introduction of LVT would arguably be the largest wealth transfer within a nation in human history and by his own admission mostly transfers wealth from the old to the young. It has sizeable risk of transferring wealth people can't spare, particularly transferring wealth away from those no longer work and cannot easily generate new wealth.

[imtringued]

You are absolutely correct, this may be a multi generational project and as far as we know politicians don't think beyond their term. Future generations, even those born today, count for nothing.

Perhaps we should just convert all inherited land into 20 year leases with a land value tax being introduced after the lease expires?

[pyradius]

The problem isn’t vastly understated, and the retirees have largely been subsidized by the current system, they aren’t losing anything. That said, I’m just as favorable to a writedown of the asset and liability. The banks can now invest in productive enterprise.

Fred Foldvary also discusses the transition and who would ultimately need compensation in https://www.progress.org/articles/the-transition-to-land-val...

I see no evidence that it would be difficult in the slightest to disentangle such things but I’m willing to be convinced otherwise by those who have done an actual analysis of the issue.

Of course, as Foldvary notes, “First of all, compensation for the loss of land value is not morally required. The typical landowner has been receiving an implicit subsidy from the government, as public goods generate higher rent and land value. One could argue that justice requires the title holder to pay back the past subsidies.”

What you see as a problem is not an ethical or economic problem merely a potentially political problem.

[throwaway4aday]

> compensation for the loss of land value is not morally required. The typical landowner has been receiving an implicit subsidy from the government, as public goods generate higher rent and land value. One could argue that justice requires the title holder to pay back the past subsidies

This is an absurd standpoint. You're going to ask 64.8% of the population that own homes, a quarter of who are nearing retirement age, to pay back what for all intents and purposes is their retirement fund? If you want to talk about morals and ethics this is clearly an immoral position. Even if we consider the assumption that the increase in value of their property is some form of subsidy, they entered into this contract in good faith as a way to provide for themselves and their families as they age and eventually retire or are no longer able to do productive work from which they can earn a living. To strip them of this and say with a hand wave that they were in the wrong for thinking that a system of ownership, that has existed for hundreds of years and was generally agreed upon by the vast majority of society, would continue to exist and that they would benefit from by lawfully participating in it... I honestly can't imagine you or anyone saying this to someones face, it's just baffling. It's on par with demanding collectivization at the expense of landowners and it would probably have the same consequences.

[TimPC]

I disagree strongly with his fundamental premise. Even if you acknowledge and accept the full moral premise of Georgism you have to assess the degree to which people are morally culpable. Slavery was a heinous violation of human rights and choosing to participate in it justified heavy financial penalties from its abolishment. Participation in slavery was far from mandatory as evidenced by businesses in the north that competed with those in the south despite not having slaves.

The current real estate system on the other hand is a fundamentally different beast. Everyone who doesn’t want to be homeless has to participate as either a renter or purchaser. Years and years of government policy have made the former decision ill advised as the financial benefits to ownership are quite large. Despite this I’d agree with the proposal if all that was being done was the removal of a subsidy.

The government is not merely removing a subsidy in this case though. They are intentionally cratering the housing market. Years of government policy has encouraged over-participation in that market. For those who want to change things to argue the government is 0% morally culpable and the individuals are 100% morally culpable is disingenuous. His argument seems to be that the financial culpability follows from the moral culpability.

He even argues that individuals participating in a system owe backwards subsidies because the government did the morally wrong thing. This amounts to intentionally bankrupting most home owners, including depriving them of funds needed for retirement. This is done in a single sentence hand waving fashion without any sort of impact analysis.

I’d argue there is a substantial problem here that spans the ethical, economic and political categories. But you seem to believe the government is 0% culpable and the individuals responding to incentives are 100% culpable. I’d argue it seems more likely you don’t actually believe that just don’t want to pay for the costs of a fair transition.

[geocon]

This is a good point but it's not a problem with georgism per se so much as the transition to get there. There are a multitude of policies that can be used to ameliorate the change from a system based on taxation of labor and capital to that of land; a common one is giving tax credits equivalent to mortgages so that lendees are not underwater. But any shift to land value taxation will be gradual anyways, so it would be less dramatic than people imagine.